Developers left out in the cold as National Grid lockout continues

Erin Tiernan Erin Tiernan The Patriot Ledger @ErinTiernan

Friday

Dec 7, 2018 at 4:00 PMDec 8, 2018 at 7:40 PM

Thousands of housing units and dozens of businesses across the state are sitting empty as developers are held hostage by a moratorium on the natural gas line work they need to get their buildings open after National Grid locked out its union workers nearly six months ago.

QUINCY — Hillside Residences, a new luxury apartment building on a quiet side street in Quincy Center, has amenities including a roof deck, a private gym and top-of-the-line appliances. It's missing only one thing: people.

Tenants were supposed to move into the 60-apartment building on Bridge Street on Sept. 1, but a nearly six-month lockout of National Grid workers, along with state and city moratoriums on new gas connections, means the building has no heat. Without heat, there can be no tenants, so the building sits empty, costing the developer, real estate agents and city thousands in lost income and tax revenue.

Industry experts say the lockout is affecting large and small construction projects throughout the 85 Massachusetts communities served by National Grid and is having a chilling effect on the region's development, economy and housing market.

Quincy is losing money on housing projects that cannot be fully taxed until they are occupied, roadwork has been delayed because there is no way to upgrade underlying gas lines, new public buildings may not open on schedule and new businesses can't open or must find alternative, more costly ways to provide heat.

Some businesses are finding a temporary fix in propane.

Quincy fire Capt. Roger Kineavy said the fire department has issued 15 permits for propane gas storage since June, more than double the number issued in the first half of the year.

"We've definitely seen a spike," he said, noting most permits were for temporary propane storage, which indicates they are workarounds until natural gas hookups become available.

ConvenientMD in Weymouth made the switch to propane to get its new building open for business. The urgent care company based in New Hampshire is making a massive push into Massachusetts, with six clinics opening within the next year. The clinic on Main Street in Weymouth opened this week.

Company construction director Ryan Hanson said that when natural gas hookup was unavailable for the Dec. 6 opening, he retrofitted the building's hardware for propane heat at a $15,000 cost to the company. It's only a temporary fix, and Hanson said he'll have to pay again once natural gas becomes available. Propane also costs almost twice as much as natural gas. Still, it's worth the expense, he said.

"We started hiring our staff nine months to a year in advance. We hired nurses, doctors, medical technicians with the knowledge that we would be open on this date. We were going to have to start paying them whether we are open or not."

National Grid locked out 1,200 union workers on June 25 after contract negotiations failed. The gas utility company brought in contract workers, but many cities and towns, including Quincy, imposed local moratoriums on non-emergency gas work.

On Oct. 8, the state Department of Public Utilities followed suit, halting all non-critical line work pending a review of the company's safety practices when a contract worker doing routine maintenance in Woburn inadvertently over-pressurized the system. Excess pressure in the gas line was also the suspected cause of the Columbia gas line explosions in the Merrimack Valley earlier this year.

It's hard to put an exact number on development projects affected by the moratorium, but National Grid spokeswoman Danielle Williamson said a backlog of new installations prior to the state moratorium was 20 percent greater than the same time period the previous year.

"Though we’d been completing many connections up until that point, by no means were we working at the same pace we would be if our normal workforce were in their jobs," she said.

The lockout has left developers in limbo, said Alex Walsh of Access Real Estate, the company hired to lease Hillside Residences in Quincy.

"We're stuck with a property we can't sell," he said.

Access Real Estate's deal with Hillside Residences should have netted the 20-person firm $150,000 in commissions. Instead, Access has had to return deposits to roughly 20 would-be tenants who got fed up waiting for a move-in date.

"I can't even imagine the trickle-down to the economy this is having. People were going to move in here that now can't. There are local businesses that would have benefited from having 60 new residences here and tax revenue to the city that isn't being seen," Walsh said.

Peter McLoughlin of Boston Property Ventures, which developed Hillside Residences, estimates he's losing about a quarter of a million dollars for every month the 23 Bridge St. building sits empty.

"There is a big ripple-down effect," McLoughlin said. "The real estate agents that worked on the sales, they don't get their fees, the dozens of people who put down deposits, had their credit run and spent time and energy to find a new home can't move in."

Hillside Residences is not the only Quincy apartment building held up because of the lockout. A 56-apartment building developed by Sean Galvin on Hancock Street has also been affected.

City projects are also feeling the effects, Quincy Mayor Thomas Koch said.

Earlier this year, city councilors approved a $17 million road paving bond. Work on eight roads started over the summer before the lockout began, but city workers are now unable to close and repave the roads because National Grid must first upgrade the gas lines.

“The roads are going to be just sitting there open waiting for the gas work,” Quincy public works Commissioner Al Grazioso told city councilors last month.

The lockout and moratorium could also push back the opening of the city's new South-West Middle School, which will replace Sterling Middle School. The new building is supposed to open to students in April, but Koch said he worries that date could come and go if the National Grid lockout doesn't end soon.

Still, he said the larger crisis is the holdup on housing.

"The real immediate issue is that we are not able to occupy housing units that are desperately needed in this region," Koch said. "Number two is that when they're fully occupied, they're paying taxes to the city, but the full tax doesn't come in until that building is fully occupied."

Koch said taxes from large-scale Quincy Center development projects such as Hillside Residences are key to paying for projects to upgrade public infrastructure and keep homeowners' tax bills down.

The consequences of the lockout have prompted state lawmakers to intervene.

On Thursday, the House passed a bill that would force public utility companies to pay unemployment benefits to workers who are involuntarily locked out of their jobs. The bill now moves to the Senate. A second bill could force the natural gas utility to ante up for workers' health insurance, which it canceled shortly after the lockout began. That bill is still being studied.

The Department of Revenue told House Speaker Robert DeLeo in October that locked-out workers had received $13 million in unemployment benefits, and were costing MassHealth about $70,000 a month.

National Grid Massachusetts President Marcy Reed, testifying before the Legislature this week, said she hopes to reach an agreement with union workers by Christmas. The company has said that even if the lockout and state moratorium end by New Year's, it could be months or years before the backlog of new connections is complete.

Meanwhile, thousands of housing units sit empty and dozens of new businesses can't open their doors because they can't get natural gas hookups, said Tamara Small, incoming CEO of NAIOP Massachusetts, a commercial real estate development firm.

"There are countless jobs affected, countless construction projects affected," Small said. "It's really staggering, and at the end of the day, developers are completely powerless to stop it."

Reach Erin Tiernan at etiernan@patriotledger.com or 617-786-7320. Follow her on Twitter @ErinTiernan.

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